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Economics 101

May 25, 2013

Economic illiteracy abounds but it ought to be obvious on its face that taxes are a cost of doing business and all costs of doing business are incorporated into the price you pay for anything you buy. Don't matter if it's an iPhone or a bag of carrots, every cost of doing business is passed on to the consumer. That means me and you, Charlie.

This is basic economics and intuitive common sense. If a business cannot recover its costs of doing busines, and a little extra something called net profit, it will fail.

The above chart appeared at PuffPo and purports to illustrate how the tax burden has shifted from corporations to individuals. That's a deliberate distortion to paint a picture that the tax and spend crowd is comfortable with. The implication that payroll taxes represent a shift of tax burden to individuals is false and you should note that individual income taxes represent roughly the same share to the treasury as they did in 1950.

The original post, which has been updated, also left out several critical things.

Payroll taxes are social security and medicare taxes not personal income taxes

Half of the payroll tax is paid by the employer

The US has the highest corporate income tax rates in the civilized world

While it is true that the social security tax burden has grown exponentially, that isn't a shift of the tax burden from corporate to personal, it's a new and growing tax burden on all working Americans. In 1950 the social security tax was 3% and was capped at 2012 inflation adjusted wages of $28,000.00. Today social security tax is almost 15% and is levied on $113,000.00 of wages and self-employment income.

The wage base is nearly four times what it was and the actual percentage of tax is five times the 1950 rate. And that STILL isn't enough to cover the cost of the Ponzi scheme we call social security. That problem is on the heads of the political classes and their supporters. They created it by making false promises that can't be kept.

Keeping business taxes low is important because it allows American business to remain competitive worldwide. Keep in mind that every time you buy a Big Mac, you're helping McDonalds pay their corporate income tax.

BONUS: Rand Paul skewers CONgress about the tax code and the harassment of Apple: